Stumbling blocks for couples in real estate financing

Many couples dream of their own four walls. Financing is a long-term project. Sometimes it outlasts the relationship. If you don’t take precautions, it can be expensive – for both partners.


The purchase of the home is for couples the largest financial joint acquisition. Numerous questions need to be answered beforehand. This includes not only how much property is available for the money available, but also who signs the loan agreement and stands as the owner in the land register. The economic and legal security of both partners in the event of a separation should not be left out of the equation.

The best thing to do before buying a house is to agree on rights of use and cost sharing in the event of separation: Who stays in the apartment? Who pays for the financing? The agreement should be reviewed regularly to see if it still fits the living situation.

The credit conditions

Most people need a loan to finance their own home. The contract should offer on the one hand much flexibility in the interest rate and on the other hand a long interest rate fixation. This is more important than the interest rate, because the loan must be able to adapt to the life situation, not the other way around.

The credit contract

Financial institutions usually insist on couples – whether married or not – signing a joint contract. If both partners are creditworthy, they should also both sign the loan agreement. From the perspective of the financing banks, this has the advantage that they can hold both of them liable if the financing collapses. Separate loans are an alternative. In this case each partner stands only for its own contract straight. However, this is rarely used in practice.

Joint liability: If both partners – whether married or not – sign the loan agreement with the bank, both are liable for the total amount and not only for the share in which they participate in the financing.

The land register entry

For the entry in the land register the ownership is decisive. In this way, it is possible that one partner bears the financial burden, but the couple is nevertheless entered jointly in the land register and is thus also joint owners of the property. This means that the house belongs to both of them equally. If one spouse buys the property alone, he or she can also be entered in the land register as the sole owner. Couples should clarify who is to become the owner in advance.

The joint land register entry

The entry in the land register serves as a precaution in the event of a marital crisis. The borrower secures his claims to the property. And the economically worse off partner gets the chance to negotiate for the preservation of the house. If only one person is listed in the land register in the event of a crisis, the other person has no rights and cannot assert any claims to the property or a right of residence.

Land register contribution: Married and unmarried couples can be entered in the land register in equal shares. They then each have a 50 percent share in the property – irrespective of their share of the financing. Alternatively, both can be registered according to their share of the financing.

No joint land register entry

In principle, this is also possible without a joint entry in the land register. Couples without a prenuptial agreement live in the legal matrimonial property regime of community of gains. This means that assets must be balanced at the end of the marriage. In other words, the spouse who had a higher increase in assets during the marriage period pays out half of the difference to the other one. The value of any property acquired during the marriage is also taken into account. With this arrangement, the other partner also benefits indirectly, even if only one spouse is the owner. If the property was acquired before the marriage, the increase in value in the meantime is taken into account in the case of a community of accrued gains.

Provision for unmarried couples

Unmarried couples should exercise particular caution when financing construction work. This is because a different legal situation applies in the event of separation or death. Without separate provision, there are no rules for the division of assets.

There are two options for legal protection:

  • notarized partnership agreement
  • Partnership under civil law (GbR)

Partnership agreement

A notarized partnership agreement can be as extensive as a marriage contract. All agreements concerning the financing, ownership and sale of a property can be recorded here. Rules on how to proceed in the event of separation or death should not be omitted.

Shareholders’ agreement

Alternatively, a civil law partnership (GbR) can be formed for the purchase of a property. This is limited to the immediate purpose – the purchase or construction of a property together with the associated financing. In addition, the formalities in the event of separation or death are regulated.

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Both in the notarized partnership agreement and in the shareholders’ agreement, the shares in which the partners participate in the financing can be stipulated. In addition, all ancillary agreements concerning the construction financing should be notarized.

The event of death

If one partner dies, the legal succession takes effect. This means that without a contractual arrangement, the partner without a marriage certificate will be left empty-handed. Unmarried couples can draw up a will or inheritance contract to provide security. Alternatively, the partner who is not entered in the land register can be given a share in the property during his or her lifetime or be guaranteed a lifelong right of residence.

In addition, the relatives of the deceased are entitled to a compulsory share depending on the degree of kinship. But the tax office also looks very closely – if the other part of the property is bequeathed to the survivor. For unmarried couples there is an exemption amount of 20.000 Euro. Of the remaining market value, the state usually collects 30 percent inheritance tax.

Separation and sale of the property

Despite marriage or partnership contract or other arrangements, the sale of the joint property is in many cases the last resort. But here, too, there are a few things to keep in mind. Because in quite a few cases the proceeds of the sale do not cover the loan debt. The outstanding residual debt is then usually borne by both – if they have signed the loan agreement together.

For this reason, the financing should be approached realistically right from the start and not calculated too tightly. Then the chances are good that if the sale of the property is necessary, the loan liabilities are not too high.

The following aspects help with financial planning:

  • Realistically assess your own living situation
  • Contribute at least 20 percent equity
  • Factor in provision for unbudgeted costs
  • No excessive special requests during construction
  • Do not set the repayment too low
  • Use unscheduled repayments

Caution speculation period

There is a speculation period for the sale of private real estate. In principle, this is ten years from the date of purchase. If the property is sold after this period, no taxes are due. But there are also exceptions that allow a tax-free sale of the private property before the deadline expires. For this to be the case, the house or apartment must have been used exclusively for the owner’s own residential purposes between purchase and sale – at least in the year of the sale and in the two preceding years.

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The tax trap of moving out and the separation year

What sounds so simple, however, can become a problem during a separation. Because: If the property belongs to only one spouse and he or she moves out after the separation, the self-use is no longer fulfilled. The same is true if the property belongs to both spouses, but one moves out. Then only the remaining spouse meets the requirement for owner-occupation.

In both cases it can be expensive for the one who moves out. In this case, the tax office may interpret the sale as a private disposal transaction and assess it accordingly for tax purposes. This is also the case when the real estate share of one partner is transferred to the other partner. This can also be interpreted as a private sale transaction.

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